ADVERTISING AGENCY

In the early years of U.S. broadcasting it did not take long for advertising agencies to embrace new media. Fortunately for advertisers, the ability to reach a mass audience with radio intersected with an expansion of the American economy in the 1920s. The techniques of mass production championed by Henry Ford, the rise of Taylorism, and an increase in disposable income in the years following World War I sustained an ideology of consumption that advertising both reflected and nurtured. NBC President Merlin H. Aylesworth proclaimed that radio was "an open gateway to national markets, to millions of consumers, and to thousands upon thousands of retailers."

The vision of eager consumers gathered around this remarkable appliance was irresistible to potential sponsors. The expansion of commercial broadcasting came with such astonishing speed that by 1931 radio was an enormous industry, accounting for $36 million in time sales on the networks alone. Larger agencies such as N.W. Ayer, BBDO, and J. Walter Thompson set up broadcasting departments and actively encouraged clients to pursue the medium.

The emergence of radio as an economic force was reflected in a crucial change regarding program development at the agency level. Through the 1920s most commercial programming originated with networks and/or local stations, with the agency serving as broker, casting about for clients willing to purchase the rights to a broadcaster-produced show. By the early 1930s, however, the agencies had reversed the equation--they were developing shows in-house for clients, then purchasing air time from the broadcasters. The key function for the agency thus became to analyze a client's particular needs and design an entire program around it, an enormously complex and financially risky undertaking, yet one in which Madison Avenue was entirely successful. By the end of the 1930s, agencies produced more than 80% of all network commercial programming.

With the advent of commercial television in 1946, there was considerable sentiment within the networks that program creation and execution would best be left in their hands, although the personnel demands and expense of video production made it impossible for any network to produce all its programming in-house. Thus, as in radio, agencies assumed a major role in the evolution of the television schedule. There was not, however, a wholesale rush of sponsors begging to enter the medium, and the networks were compelled to offer time slots at bargain rates to attract customers. Companies such as Thompson and Young & Rubicam had already developed some television expertise, but the vast majority of agencies found themselves at the bottom of a very steep learning curve. Still, Madison Avenue produced some of the most enduring programs of the "Golden Age" of television, including Texaco Star Theater, Kraft Television Theatre, and The Goldbergs.

As more stations began operation--particularly after 1952--the cost of purchasing air time on the networks and local stations increased dramatically, as did production budgets. Most agencies accepted as an economic fact that they could no longer afford to create and produce their own shows as they had in radio, and the recognition on Madison Avenue that complete control of television production was unprofitable to the agencies themselves contributed to the evolution in programming hegemony away from the agencies to the networks. Thus, agencies never assumed the kind of production control in television they enjoyed in radio; they could never put into play the same economies of scale as the networks and independent producers. The 15% commission that served as the source of agency revenue simply was not enough to cover the ever-increasing expenses associated with television production. Many agencies subsequently shifted their emphasis to the production of commercial spots, while others moved aggressively into syndication, forming partnerships with Hollywood producers to create filmed series that could be sold to a variety of sponsors.

 

 

As costs rose during the 1950s, the gap between agency income and expenses narrowed considerably, forcing a reconsideration of organizational structure, leading to the emergence of what was termed the "all-media strategy," which remains the dominant paradigm. Most agencies had relied on specialists in a strict division of labor such that a client's advertising might be divided up between three or four different departments. The all-media approach rejected this diffusion of responsibility, placing a single person or team in charge of a client's overall needs. By eliminating specialists and fostering cooperation between divisions, agencies could streamline personnel, coordinate functions, improve efficiency and thereby reduce overhead.

Advertising agencies had an agenda distinct from that of their clients. Although publicly they represented the clients' interests, many Madison Avenue executives also promoted network control of programming in the trade press. Because of their concerns over the increasing costs and complexities of program production, and their frustration with mediating disputes between advertisers and networks, many hoped television would not continue the radio model of sponsor ownership of time slots. Concerned that the expense of television programming far outstripped that of radio production, agency executives sought ways to develop television as a mass advertising medium while also seeking to avoid draining agency revenues with television program costs. In this sense, the evolution of the all-media strategy is illustrative of how the economic pressures brought to bear on agencies during the 1950s changed the way Madison Avenue approached programming, from an advertising vehicle to one (albeit primary) component of a marketing plan.

Today, the advertising agency is primarily responsible for the production of commercial spots as well as the purchasing of air time on behalf of clients. The situation has become murkier in recent years, however, as some large companies (Coca-Cola, for example) have begun producing much of their own advertising in-house, bypassing Madison Avenue. Further, the networks now frequently approach potential advertisers directly rather than going through the client's agency. In an era when even large shops such as Chiat/Day are acquired by enormous multinational holding companies, the role of the agency is now focused more on using powers of persuasion in many different media than merely in creating a single great advertisement.

-Michael Mashon

FURTHER READING

Agnew, Clark M., and Neil O'Brien. Television Advertising. New York: McGraw-Hill, 1958.

Hilmes, Michele. Hollywood and Broadcasting: From Radio to Cable. Urbana: University of Illinois Press, 1991.

Lears, T. Jackson. Fables of Abundance: A Cultural History of Advertising in America. New York: Basic Books, 1994.

McAllister, Matthew P. The Commercialization of American Culture: New Advertising, Control, and Democracy. Thousand Oaks, California: Sage Publications, 1996.

McMahan, Harry W. The Television Commercial: How to Create and Produce Effective TV Advertising. New York: Hastings House, 1954.

Settel, Irving, and Norman Glenn. Television Advertising and Production Handbook. New York: Thomas Y. Cromwell, 1953.

See also Advertising